Tag Archives: CLS Bank

Software Patents in the USA

Much of the future of software patents in the US (and possibly the world) turns upon a case heard yesterday in the Supreme Court in Washington DC.

Alice Corporation has a patent on a computerized escrow system and method that is allegedly used by CLS Bank for settling transactions. Alice sued CLS for patent infringement, and CLS responded arguing that the claims of the patent are invalid as they “encompass an abstract idea”. The decision could focus very narrowly on the facts of the case, but many hope that the Supreme Court will actually address the whole issue of software patents and give some guidance on which types of patents are valid. The transcript of the proceedings can be read here.

The question resolves around section 101 in the US Patent Code which clearly states that offers patent rights to anyone who “invents or discovers any new and useful process, machine, manufacture, or composition of matter.” In practice, very few of the patent cases involving section 101 cases actually refer to the statutory text.  The focus is more on the cases previously decided by the Supreme Court that the statute also prohibits patents on abstract ideas, products of nature, and natural phenomena.  It’s the concept of an abstract idea that is core to this case.

The US government through the Office of the Solicitor General is arguing that any software patent that improves the functioning of computer technology is eligible.  And any software patents that is used to improve another technology is eligible.

CLS argues that the computer implementation must offer a technological solution and that is missing in this patent.

Whatever the decision, its effects will be seen on the software industry. Should the court restrict its decision to the facts of the case, then the question of software patents will rise again soon. Should the court be expansive and argue that section 101 should be interpreted broadly, then many patents granted by the US Patent Office in the last few years could be rendered invalid – and potentially render worthless billions of dollars of investment. On the other hand, if the court upholds the principle of software patents, then many will continue to push for changes in the law – and that is the best forum. It’s really not up to the Supreme Court to make law, but for activists to push for changes in the law through Congress.